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GAO reported on whether value engineering (VE) could be used to achieve cost reductions for wastewater treatment plants funded by the Environmental Protection Agency (EPA) by extending VE to: (1) design plans of projects costing from $1 million to $10 million; and (2) construction through the use of construction incentive clauses. VE is a method of analyzing a product or service so that its function can be performed at the lowest possible cost without sacrificing overall quality.

GAO found that: (1) EPA requires VE design reviews only for projects costing more than $10 million and does not require VE during project construction; (2) increased use of VE on wastewater projects could save EPA from $25 million to $57 million annually; (3) EPA and other agencies have achieved cost savings by using VE on smaller projects, including wastewater projects, during both design and construction; and (4) an EPA staff study recommended VE design reviews for all projects costing more than $1 million. GAO also found that: (1) out of 2,750 EPA-funded projects costing less than $10 million under construction during 1983, state officials reported that only 7 had been value engineered; (2) few grantees are likely to use VE voluntarily because project cost savings are passed back to the states and project study costs are paid by grantees; and (3) many state officials are opposed to the use of construction incentive clauses because of concern that such clauses might increase administrative work, reduce project reliability, and fail to generate enough savings to justify the effort.

Matter for Congressional Consideration

Status: Closed - Not Implemented

Comments: The proposed Clean Water Act of 1986, which was vetoed by the President, did not contain provisions for VE reviews of projects costing more than $1 million.

Matter: Congress should revise the Federal Water Pollution Control Act to require VE review on designs of wastewater treatment projects costing more than $1 million.

Recommendations for Executive Action

Status: Closed - Not Implemented

Comments: EPA does not intend to test the value of requiring construction incentive clauses because it believes voluntary efforts are more appropriate.

Recommendation: The Administrator, EPA, should promote the benefits of identifying cost-saving measures through the use of construction incentive clauses among applicable EPA, state, and grantee staff and contractors during the test period.

Agency Affected: Environmental Protection Agency

Status: Closed - Not Implemented

Comments: EPA does not intend to test the value of requiring construction incentive clauses because it believes voluntary efforts are more appropriate.

Recommendation: The Administrator, EPA, should test the value of using construction incentive clauses by: (1) requiring their use for a period of time in EPA-funded wastewater treatment construction project contracts; (2) evaluating the results achieved; and (3) assessing whether such a technique is effective on a permanent basis in controlling costs.

Agency Affected: Environmental Protection Agency

Status: Closed - Not Implemented

Comments: EPA believes the allowance for planning and design provided to grantees, based on a percentage of total project costs, reflects VE costs to the extent VE has been done in the past on projects costing $1 million to $10 million.

Recommendation: The Administrator, EPA, should revise regulations to make VE design study costs for projects costing from $1 million to $10 million eligible expenses of the construction grant.

Agency Affected: Environmental Protection Agency

Status: Closed - Not Implemented

Comments: EPA does not intend to take action because it perceives the need for congressional direction on this issue.

Recommendation: The Administrator, EPA, should revise regulations to require VE review on designs of construction grant projects costing more than $1 million.

Agency Affected: Environmental Protection Agency

Status: Closed - Not Implemented

Comments: EPA does not intend to test the value of requiring construction incentive clauses because it believes voluntary efforts are more appropriate.

Recommendation: If the results are positive, the Administrator, EPA, should require construction incentive clauses on a permanent basis.